What Does The Average Australian Actually Earn?

With the Federal Budget being passed today, we're bound to see a lot of discussion about its impact on families/battlers/home owners/insert-your-own-category. One key element in that discussion will be how much the typical individual or household actually earns -- a figure that's quite complex to nail down but lower than you might expect.

Blogger and statistician Matt Cowgill runs through the numbers quite thoroughly, using the most recent available data in a range of categories, including average and median wages, average income for taxpayers, and gross and net income for households. The entire post is well worth checking out for an appreciation of the different ways incomes can be measured.

However, there's one key point that stands out: claims that anyone earning a six-figure salary is "doing it tough" don't have an awful lot of merit. If you earn above $105,461 in taxable income, you are earning more than 90 per cent of taxpayers. Hit the post for the full set of figures and a lot more context.

Can someone explain why my comments are suddenly being vetted for moderation? This last week nearly half are being hit withHeads up! This comment is awaiting moderation. Check back soon!... ? Really? this one too..

Yeah same with me for weeks on end but only on lifehacker.. I never got a response, but then - Angus rarely (if ever) seems to respond to comments (even though if you ask me it's one of the top viewer engagement strategies).

I sent them a line as well explaining you could get around it every time by just pressing edit, not making any changes and submitting - so that's what I've been doing for any post I didn't want to wait 12 or more hours to appear on the site.

I'm not sure how their system works, but it might be that somebody hit the 'report' button on a few of your comments and it flagged all your comments for moderation for a while? It's not too difficult to do accidentally, and the system might not differentiate between legitimate reports and those without merit.

Yeah, probably some twit didn't like a comment or reply so decided to be a little bitch about it. Which begs the question of who is moderating and what their parameters are. Still a pain in the bum though. :)

Yeah, I remember when the PM announced the changes to the Medicare levy saying "A person on the average national wage of $70,000..."
I had to yell out to my wife "Holy S***!! Love, how much are you earning! Time to ask work for a raise because the PM both of us and our work colleagues are getting paid well under the average!?!"

... claims that anyone earning a six-figure salary is “doing it tough” don’t have an awful lot of merit. If you earn above $105,461 in taxable income, you are earning more than 90 per cent of taxpayers

As Matt's analysis points out, though:

When I refer to income as your ‘material standard of living’, I’m ignoring the value people derive from consuming their assets, such as living in owner-occupied housing. That’s an important issue, but beyond the scope of this post.

If you're living in the inner suburbs of Sydney and Melbourne, where cost of living is relatively high, you might be doing it tougher on $105,461 - where perhaps 63% of your income goes into housing, than say, Armidale in regional NSW, you could be earning less than the median wage ($57,400 according to Matt), and be doing very well, with "only" 57% of your income going to housing.

Keeping in mind, though, that well almost 75% of Australians live in either a capital city, or a regional city with a population over 250,000. So, if you're on $100k or more, you're almost certain to find someone nearby doing it tougher than you, so maybe keep your whinges to yourself.

I'm sorry, but living in the areas you mention is not an excuse to say you are "doing it tougher" in all but exceptional cases. The decision to live in the inner city suburbs is for the vast majority a lifestyle choice; not being able to support your lifestyle choice on the wages you earn is not "doing it tough", it's being unrealistic. This distinction seems to elude a lot of people.

Where I live is not a "lifestyle choice". It's the result of moving interstate when accepting a job offer, then trying to find housing reasonably close to the job. Hence: Adelaide. Northern suburbs.

If I could live in Richmond QLD and pay just $1 for the land, I'd still be up for massive expenses travelling to work. http://www.news.com.au/realestate/buying/rural-land-going-for-1-even-cheaper-than-chips-in-fact/story-fndban6l-1226641553639

"It's the result of moving interstate when accepting a job offer, then trying to find housing reasonably close to the job"

I'm sorry my friend but these are both fundamentally lifestyle choices. You could have sought a presumably inferior job that didn't require moving interstate, and you could also have accepted less conveniently located housing. Pretty much everything we do is balancing choices based on the lifestyle we want to lead.

If you're not doing it tough, fantastic. But unless every Australian earning that same amount of money is a clone of you living in the same place at the same time, your experience isn't universal.

My point is, your neighbour could be on the same income and be in serious trouble - for any number of reasons: they might have a child (or a parent) that needs expensive medical care (http://www.abs.gov.au/ausstats/[email protected]/Lookup/by%20Subject/1301.0~2012~Main%20Features~Health%20service%20usage%20and%20experiences%20of%20care~234), their house may have been damaged or destroyed in a bush fire or hailstorm (http://www.abs.gov.au/ausstats/[email protected]/Lookup/1301.0Main+Features1952012), or they may a significant debt that means their pay packet is much smaller than yours (at $60k, HELP alone knocks $57.50 a week off the pay packet), or maybe they're retired on a fixed income of $60k.

Not one of those possibilities is any kind of a "lifestyle choice" (well, maybe HELP, if you regard tertiary education as a privilege, I suppose).

The ABS produces 6467.0 - Selected Living Cost Indexes, Australia to answer the question "By how much would after tax money incomes need to change to allow households to purchase the same quantity of consumer goods and services that they purchased in the base period?" (http://www.abs.gov.au/ausstats/[email protected]/mf/6467.0).

I'm not arguing that for a significant number of people in Australia - more than likely the majority of people - earning over $57,400 is enough to live comfortably. But income levels are a blunt instrument - as opposed to a diverse range of personal circumstances - and it's not helpful to make sweeping statements like "claims that anyone earning a six-figure salary is “doing it tough” don’t have an awful lot of merit".

You're right that almost any universal statement relating income to 'doing it tough' is likely to fall down in some cases, but from a taxation and rebate/support perspective these should be considered as special cases.

Your mention of Karratha does raise an interesting point, in that where there is a pocket of very high income (and $150k a year is very high income) and very limited availability, the price can sky-rocket. However, in a situation like that the rental prices will increase to the maximum that people can bear (minus overheads and inefficiencies). If incomes were $500k a year there, people would probably still be 'doing it tough' because house prices and so forth would increase to new limit of ability-to-pay. This is compounded by some companies in Karratha paying the rent, and so having a greater ability-to-pay.

I'm not quite sure how to consider somewhere like Karratha, but again it is clearly an atypical case.

However, in a situation like that the rental prices will increase to the maximum that people can bear

Unless, for example, you were living there on a good income before prices sky-rocketed, in which case your comfortable cost of living just become decidedly uncomfortable.

but from a taxation and rebate/support perspective these should be considered as special cases

It depends on the circumstance - the Karratha example is exceptional, but over 770,000 Australians made financial hardship claims as a result of natural disaster in 201. It's hard to make generalistations within that, given location, timing, etc., but say we assume that the 770,000 is a big enough number that we can take it as a microcosm of Australia, and project the same stats. If you assume, say 5% of those 770,000 are on $105k or more (half the 10% figure, because hardship claims will more often come from lower income bands), that's 32,500 people - large enough numbers to question whether they are "exceptional".

Special cases can be more common than you think. Over 11,000 people in the highest income quintile listed themselves as a primary carer of someone with a disability or requiring aged care, while over 120,000 said they had some caring responsibilities (you can be cynical about what that means, if you like - but keep in mind, this is off census data, not income data - there's no benefit (monetary or social status) to claiming to be a carer in this case). Combined, that's the population of Darwin. About 22% of those borrowed money within 12 months of reporting, 19% had cash-flow problems, and 15% had difficulty paying bills.

Just to be clear, I'm no supporter of so-called "middle class welfare", and I do think the majority of people in that top 10% should bare more of the burden and get less of the government-funded benefits - at that income level, you're clearly enjoying many privately-funded benefits. Or worse, if you consider a recent SMH article that "...2320 taxpayers with declared incomes of more than $100,000 paid no tax. They earned $75 million in wages and salary, and spent the same amount on tax advice. Their total income of $652 million was cut to a combined taxable income of $604,000 - $260 each." But those 2320 are out of 2.3 million Australians (or, 10% of the population) who earn over $100k - they are the special cases.

If you were living there before the mining boom, then the situation is indeed quite different. Unfortunately, at that point it may be that those people need to leave Karratha (if they didn't own their home) because of the cost of living. I think it is unfortunate, but I don't think it is the role of government to prop up people in that situation.
I don't think we can take that 770,000 as a microcosm of Australia for the same reason we couldn't do so if a storm affected 770,000 people in the inner Melbourne suburbs - being in the same geographic area is likely to lead to greater homogeneity. In addition, the very fact that they can make hardship claims means that the situation is being treated as exceptional, which is as it should be.

In terms of high tax brackets and high tax rates: I totally agree, it is (or should be) criminal that super-high income earners are able to evade tax the way they do. My argument isn't for flattening tax, or anything like that.

Regarding people saying they are under financial hardship, borrowing money, and so forth: this really strikes at the heart of the problem (in my view). People really do believe thy are in financial hardship, and that things should be easier for them, when the problem is actually expectations.

Anyway, basically my argument is that:
1. Benefits (e.g. family benefits, super co-contribution) should be means tested, but 'essential services' (e.g. hospital care, education) should not. The line between them is not always clear, I'll admit. Either that, or the progressive tax should be such that the tax offsets the benefits so the benefits don't need to be means tested. There are administrative overheads for both these situations, and they are different for each.
2. Taxation at the higher end needs to be tightened up, and severe financial penalties need to be applied to those who illegally dodge tax (and this needs to be closely policed initially and have periodic crackdowns).
3. People really need to get their heads around what financial hardship is, and is not. Struggling to pay the rent while raising a couple of kids on a $40k a year job = financial hardship. Struggling to pay the mortgage on both the home and the investment property while raising a kid on a $105k a year job: not financial hardship. A lack of public awareness of the reality of incomes is probably a key part of this. There are many other aspects too (e.g. people not feeling social affiliation, which erodes a desire to contribute to society when the benefits aren't personally felt, etc).

Anyhow, I think we're roughly agreeing on the general direction, but perhaps not so much on the details.

The "average Australian" is a bit of a messy concept. For example a family of 4 with 2 $50k incomes gets more money than one with a single $100k income. And do we consider that family with a single $100k income to actually average out at $25k, or do we count it as a $100k income? (And then consider that if it was counted as 4 $25k incomes the tax would be a HUGE amount less!)

I'm not quite sure what you mean here. The numbers are for (full-time) wage earners pre-tax income, so if the two kids in a family are not working they are not counted in this at all. Thus, the two $50k incomes are two $50k incomes, and having kids isn't artificially driving down the income average.

One of the problems with the concept of 'doing it tough' is that it seems more and more (to me) that doing it tough means paying off a mortgage, paying off a nice new car, and then struggling to pay for a home theatre system. That isn't universal - there are people who really are doing it tough and struggling to afford food on a week to week basis for their family and not as a result of poor financial prioritisation.
The situation is made more complex by very large variation in housing prices and rents: a family can be finding financial management difficult with a $105k income after buying a $1.2m house in a nice suburb near the city. However, I'd be hard pressed to call this 'doing it tough'.
Another factor on 'doing it tough' is high rates of private education, and the cost associated with it. The unfortunate thing is that this leads to political pressure to provide subsidisation for private education or increase funding to private schools, rather than the (better, in my view) approach of improving public education such that private schools are a choice based on preference rather than quality.

Any which way, if someone on $105k/year is 'doing it tough' they need to be revising their decisions, expectations, and priorities rather than whining about it.

Edit: Added note that it is 'full time' incomes, and doesn't include part times which would be lower.
Note: just realised that part-time incomes may be lower overall but may be higher per hour (and as a result, someone can afford to work part time). I think this would be the exception rather than the rule, though.

the average wage would be more like 40-50k especially in regional areas and i can tell you that is not enough due to the increase cost of fuel, housing is about the same as penrith or worse, electricity is expensive.
anyone earning over that saying they are doing it tough:
1. adjust your lifestyle
2. move
3. if you cannot move due to work requiring you to be within x distance of there location they maybe should help with the rent or pay more money.

The average is problematic in this case as there are a few on massive pays, this will make the average wage look higher than it is, in this case, as the author of the article referenced did, the median is a better marker for what people are earning.

Haha whaat? I earn under 40k and I wouldn't say I'm doing it tough. Sure, I don't have a family to feed or a mortgage, but whilst saving up for a holiday recently I was able to set aside $400 a week, and I could still afford to eat, pay bills and get to/from work. Yes it was tight, but I got by. Anyone who earns over double what I do and claims to be doing it tough really needs to adjust their lifestyle.

Yup. I manage on 30k. I don't have kids or a mortgage, but I still pay rent and all that, have private health insurance and luxuries, and yet I have money left over to spend $3500-4k on a computer and other spoils plus savings. I don't sacrifice quality for price either.

If you clear $1000 a week you're doing ok ( joined the club recently) ( have to work 55 hours to get it) then again I don't insist on a takeaway coffee and lunch everyday,a new car and an overinflated $600,000 + house.if you're struggling, sell off and scale back.my son in law is a fully qualified boilermaker/ welder on $22 p/h.perspective

THIS has been a most enlightening discussion to me.
The number of comments from happy people on low incomes - and I believe under $50,000 today is low income if a marriage is involved - does raise the question of commenter's respective ages/life experience.
E.G. "saved $400 p.w. for a holiday"!
I am beginning to feel that I'm the only one noticing the looming financial changes in "lifestyles".

It *IS* possible to live on a very small income with the following provisos:

1. You are young and uncommitted.
2. Expect to inherit Dad&Mums house.
3. Believe that the future is going to care for you like today.
4. Aren't planning on having kids - ever.
5. Expect to never get seriously ill, or have an accident.
6. Confident somehow that your job is permanent.
OR
You are an old age pensioner and resigned to a ever-more monastic lifestyle.

Oh, one small thing:
What realistically, is the grouped average wage percentage in say, $20,000 groups? (Leaving out pensioners, of course, who don't count). What are MOST fulltime wage earners earning?
What are they really spending it on?

Incomes don 't tell the full story . Where is the data that takes assets into account ? Some people in inner city suburbs are earning average incomes , or are retired and living on supersnnuation benefits , but are living in million dollar houses that they bought for 200k 15 years ago .
In a debate with a friend recently I estimated that residents of Brisbane inner city suburb New Farm are likely amongst Queensland 's top 1% wealthiest people. How can I find data that proves me right or wrong ?

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